Safe haven currencies gain as #AUD and #NZD drop – 29th September 2015

Falling commodity prices are making themselves felt in the production chain and yesterday it had a considerable impact on exchange rates. Yesterday, shares in Glencore, a huge mining and trading firm, fell by nearly a third sparking a wider sell-off in commodities and sending share prices lower around the world.

As ever, when investors are nervous they put their money into what they perceive to be a safe currency and yesterday the safe currencies that benefited were the Japanese Yen, the Swiss Franc and the newly-safe Euro. All three strengthened by around 1% against Sterling.

On the other side of that coin, a move out of commodity-oriented currencies was felt particularly by the South African Rand, which fell by -1.5%. The Australian and New Zealand Dollars’ fell by the same amount that safe haven currencies rose. Charles Evans and John Williams, the two Federal Reserve chiefs who spoke yesterday, failed to deliver the expected unanimity about US interest rates. Whilst Mr Williams renewed his call for an increase “sometime later this year” his colleague was considerably more cautious. Mr Evans said the Fed would need to roll-out more stimulus “if things were to weaken very much”. The two views cancelled out one another, leaving the US Dollar just a third of a cent higher on the day.

This evening the Bank of England Governor will be speaking at Lloyds of London and his words will be important to investors’ expectations for UK interest rates and Sterling. Ahead of that, the bank’s lending and mortgage approval data this morning will set the early tone for Sterling.

Other data released today are of less importance and not expected to impact the currencies. Spanish and Norwegian retail sales, German inflation and business and consumer confidence around the Eurozone are all out this morning while Canadian industrial production and US consumer confidence and house prices are out this afternoon.